SIFMA’s Gregg: Debt Ceiling Compromise in the Works

Former Sen. Gregg and other observers see the president and GOP striking a "mini-grand bargain" that includes entitlement and tax reform.

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SIFMA CEO Judd Gregg. (Photo: AP)

Congress and the Obama administration are “moving away” from defaulting on the nation’s debt, with a “mini-grand bargain” in the works, Judd Gregg, CEO of the Securities Industry and Financial Markets Association, said Friday.

On a conference call with reporters, Gregg, a former Republican senator of New Hampshire, said that both House Speaker John Boehner, R-Ohio, and the Obama administration are hopeful for a deal “where they wrap up a continuing resolution” that will likely also include an entitlement and tax reform package. “They just need to get in a room and work out the details,” Gregg said.

As SIFMA notes, Treasury has approximately $370 billion in debt coming due between late October and Nov. 15. “Normal procedure would be to roll over this debt,” SIFMA said, “but debt ceiling risks include higher interest rates and limited auction participation in rollover auctions.”

Indeed, political strategists echoed Gregg’s views and are also optimistic that the tide is turning toward a deal to raise the debt ceiling and reopen the government.

In his Friday commentary, Greg Valliere of Potomac Research said Boehner was “beginning to cave,” conceding that “Obamacare can’t be stopped or altered” and that he has also ruled out a “default crisis.”

After getting an “earful” fromRepublicans back home, Valliere said, Boehner and other Republicans will now resort to a new tactic: “de-emphasize opposition to Obamacare and instead seek a deficit reduction deal, perhaps combined with a softening of the hated budget sequester.”

Indeed, Valliere added that there was “a growing buzz in Washington about a possible bargain,” not a “grand compromise” but rather one “that would be more like a down payment on entitlement and tax reform.”

Andy Friedman of The Washington Update told CNBC on Thursday evening that a compromise would likely include “a small change to entitlements (perhaps use of chained CPI to temper future growth of Social Security benefits) and closing some tax loopholes.”

Friedman added that the prospect of a U.S. default was unlikely. “If necessary Speaker Boehner will introduce a ‘clean’ bill opening the government and raising the debt ceiling, and pass it with Democrat and moderate Republican votes,” he said.

Valliere predicted, however, that even if both parties agree on the “rough outlines” of a deal, it would likely “take another week for it to come into focus,” perhaps after Columbus Day on Oct. 14.

“It could be Oct. 15 or 16 before a shutdown/debt ceiling deal is enacted,” Valliere said, “perhaps only hours before Treasury’s Oct. 17 deadline.”

Melanie Waddell

Melanie is Washington Bureau Chief, Investment Advisory Group. She also covers regulatory and compliance issues and writes The Playing Field column and Human Capital briefing. Reach her at mwaddell@alm.com. On twitter: @Think_MelanieW

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